Boohoo has acquired the minority 34% stake to wholly own PrettyLittleThing shortly after mounting a defence of its ownership of the brand against a short-seller attack.

The online fashion retailer said the acquisition of the entirety of PrettyLittleThing, which will be made for an initial consideration of £269.8m, will allow Boohoo to accelerate its growth “whilst retaining a strong balance sheet in order to take advantage of numerous M&A opportunities that are likely to emerge in the global fashion industry over the coming months”.

The acquisition follows Boohoo’s share price falling 12% earlier this week after a 53-page report by activist investor ShadowFall, which alleged the retailer had provided a “misleading impression” of its free cash flow position and had overstated its free cash flow by 65%.

Boohoo said it “strongly refutes the allegations made in the research note” by the hedge fund, whose founder Matthew Earl is known in the City as the ’Dark Destroyer’.

ShadowFall’s note also claimed the cost of buying out PrettyLittleThing could reach £1bn – a figure Boohoo dismissed, saying it would pay market rate and was entitled to a 30% discount on any deal.

Numis analysts had forecasted the acquisition would cost £480m, but the initial figured offered by Boohoo today is below both these estimates and will be funded through a combination of shares in the group amounting to £108m and a £162m upfront cash payment.

Despite raising £200m in a share placing earlier this month – specifically to fuel takeover bids of other fashion retailers – Boohoo has said its upfront cash payment for PrettyLittleThing is being funded from the £240.7m of net cash it had on its balance sheet in February.

PrettyLittleThing’s senior management team will remain in their current roles following the acquisition.

Booohoo chief executive John Lyttle said: “We are delighted to be acquiring the remaining 34% stake in PLT. It has been a brand that has delivered strong growth as part of the Boohoo group’s platform, and has a great future ahead of it in the UK and overseas. I look forward to building on the great working relationship with Umar [Kamani, PLT founder] and the senior team at PLT as the group continues to move forwards with its multi-brand strategy as part of its vision to lead the fashion e-commerce market globally.”

Kamani added: “This deal represents another milestone in our journey at PLT. Since being a disruptive start-up in 2012 to a global fashion brand that generates over half a billion pounds in sales today, I am incredibly proud of what my team and I have achieved in such a short period of time. The team and myself have big ambitions for the brand, and I’m incredibly excited about what the future holds for PLT as it embarks on the next stage of its global journey as a fully owned part of the Boohoo group.”

Topics